Sheriff’s Sale

How A Sheriff's Sale Works

After the lender has notified the borrower of default, and allowed the borrower to have a grace period to make up the mortgage payments, a sheriff's auction takes place. This auction allows the lender to quickly recoup the loan in default.

These auctions are often held on the steps of a city's courts, and are managed by local law enforcement agencies. They are also known as sheriff's sales. The property is sold to the highest bidder at an auction that is publicly announced. Notices about each auction can be found in local newspapers as well as on many other online sites.

Understanding how mortgages and foreclosures work is essential to understand the steps leading up to a sheriff's sale. A mortgage is a debt instrument secured with a specific property called collateral. The borrower must repay the amount of principal and interest payments as agreed upon in the loan contract within the due time.

In turn, homeowners take out mortgages to borrow large amounts of money that they are unable to pay upfront. The buyer uses their home as collateral for the lending institution. The lending institution can claim the property if the mortgage is defaulted on.

Foreclosures

Foreclosure is the legal process by which the collateral property in a mortgage document is sold in order to pay the debt. The mortgage holder or another third party who has purchased the property in a foreclosure sale takes ownership.

Local law enforcement is responsible for enforcing foreclosures and evicting the owners. The sheriff's office doesn't care about holding onto a house and banks don't want in the landlord business. After the foreclosure is over, auctions can be held quickly.

A tax authority can also initiate foreclosure proceedings. The federal government, local governments, and other tax authorities may attach tax liens to real property if income or property taxes are not paid. The lien attached to the property is now a claim. Tax authorities have the power to pursue these unpaid liens through the courts and foreclosure proceedings if they are not paid.

Take Note

The lender will usually sell a property it has repossessed by itself if the property is sold at a regular foreclosure auction. If the property is being sold through a regular foreclosure auction, it must be authorized by a court. The court will issue a directive to the sheriff's department to sell the property after the taxing authority or lending institution has received a judgment.

The owner of the defaulted property might be able to recover it in many states by paying the full amount of the lien and any associated fees. This law is known as the right to redemption. It varies between states and even among municipalities.